Megatrends

The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.

Cigarettes in Pakistan

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Executive Summary

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PROSPECTS

Short-term gains from tax reforms expected to filter out with further tax hikes planned

There was a further increase in excise tax on cigarettes in 2018, reaffirming the government’s commitment to reducing smoking prevalence. Tier 1 priced products saw an increase in the Federal Excise Duty (FED) of 13%, while Tier 2 and Tier 3 saw increases of 4% and 46%, respectively.

Tax reforms close price gap winning share back from illicit trade

During the review period, there were over 45 manufacturers selling approximately 145 cigarettes brands that evaded taxes and regulations, with local illicit brands available for as little as PKR15 per pack. These low prices saw illicit trade take up an increasingly large share of overall sales of cigarettes, up until the introduction of the new tier 3 rate of Federal Excise Duty (FED) in late 2017.

New health tax poses further threat to the industry

In 2019 the Prime Minister’s cabinet took the decision to impose a new health tax of PKR10 on each pack of 20 cigarettes in order to help generate funds for the country’s health sector, with this set to be included in the Finance Bill 2019. It was also agreed that the new Finance Bill would allocate funds to help tackle the illegal manufacturing and illicit trade of cigarettes in Pakistan.

COMPETITIVE LANDSCAPE

Economy positioning favours Capstan By Pall Mall

Capstan By Pall Mall from Pakistan Tobacco Co remained the leading brand in cigarettes in retail volume terms in 2018. With an economy positioning the brand is primarily targeted at lower-income consumers.

Pakistan Tobacco and Philip Morris continue to invest in their premium brands

Economy brands retained their lead in cigarettes in 2018, boosted by the introduction of the third tier of Federal Excise Duty (FED). Nevertheless, Pakistan Tobacco and Philip Morris continued to focus on their premium brands such as Benson & Hedges and Marlboro, respectively.

Increasing costs puts pressure on leading players

The introduction of a third tier of Federal Excise Duty (FED) gave a boost to Pakistan and Philip Morris with both players seeing gains in 2017 and 2018 at the expense of smaller players and illicit trade. Nevertheless, this is expected to be only a temporary boost, especially given the new government’s decision to remove the third tier of FED, coupled with a further increase in tier 1 and tier 2 FED.

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